I am insured by Liberty Mutual for homeowners insurance. A tree limb broke off from a neighbor’s yard due to high winds. The limb landed on my outside awning which is over two new large windows. The only damage was to the awning, which is torn away from house at two support brackets and bent across the entire awning. The awning needs to be removed, and my neighbor’s insurance company told him that due to an act of nature he is not responsible for damages. My agent told me that Liberty Mutual will increase my homeowners insurance rate by $600 next renewal season. Should I use my homeowners insurance to have the awning taken down and removed? I take this as more of a threat from my insurance company to not use the insurance I have paid for for several years. Is this standard policy by my insurance company or are all insurance companies doing this due to extensive weather related insurance claims throughout the country? What am I really paying for?
The rate increase does seem unfair, but many insurers include a rating factor in their rating plans for homeowners coverage that is based on the insured’s “claims history,” or something to that effect.
For many insurers that “claims history” factor may be a discount for those insureds that have not had a claim for several years. However, when there is a paid claim, it then results in losing that discount and instead receiving a surcharge at the next renewal. So the premium increase at renewal can be significant–as your agent has pointed out.
That increase/higher rate is only justified when insurers maintain credible, historical loss data that demonstrates that a policyholder that has had one claim is more likely to have a second claim than a policyholder that has had zero claims is likely to file a first claim. Unfortunately, I believe many insurers do have the necessary data to justify the premium increase.
This scenario is one reason why homeowners should choose the highest deductible as they can reasonably afford. If you aren’t going to submit a claim under $2,500, for example, because you don’t want your renewal premium to increase due to filing a relatively small claim, then you might as well get the premium savings that comes with a higher deductible.